This Blog is being written for the benefit of independent trustees of Spousal Trusts.
By way of introduction, a Spousal Trust is a type of testamentary trust created under a Will which is designed to benefit the surviving spouse.
In order to qualify as a Spousal Trust the living beneficiary spouse or common-law partner is entitled to receive all the income that may arise during the lifetime of the spouse or common-law partner. That spouse or common-law partner is the only person who can receive, or get the use of, any income or capital of the trust during his or her lifetime.
Benefits of a Spousal Trust;
a) The trustee of the Spousal Trust can elect to defer the realization of deemed accrued gains on the property owned by the deceased spouse. In order to qualify for this benefit under Canadian income tax rules, both the deceased spouse and the trust receiving the property must be resident of Canada immediately before his or her death.
b) The Spousal Trust also qualifies as a separate tax payer and, therefore, there is the potential for income tax splitting opportunities
c) The property owned by the Spousal Trust is creditor proof
d) Any property remaining in the Spousal Trust on the death of the surviving spouse will pass to the heirs as determined by the testator
Before accepting the appointment as an independent trustee of a Spousal Trust, one should consider the possible longevity of such an appointment. The following article (which appeared in the most recent edition of the Economist) illustrates the potential time-span that a trust could run.
” When Gertrude Janeway died in 2003, she was still getting a monthly cheque for $70 from the Veterans Administration for a military pension earned by her late husband, John, on the union side of the American civil war that ended in 1865. The pair had married in 1927, when he was 81 and she was 18. The amount may have been modest but the entitlement spanned three centuries illustrating just how long pension trust commitments can last…”